The VA Home Loan Program was introduced at the end of World War II to help the returning men and women who served in the armed forces (and their surviving spouses) buy a home. The program provides easy access to mortgage loans for both purchase and refinance.
It streamlines the mortgage application process and offers excellent features. Benefits include no down payment, no monthly mortgage insurance payments, and closing costs can be either rolled into the loan or paid using gifted funds.
Because the VA loan is backed by a guarantee from the federal government, it is widely available through most banks and direct lenders. But not all VA lenders are created equal.
What to Look for When Choosing a Lender for Your VA Loan
o Experience – Customer service is a key differentiator with lenders because much of the products are the same. In the case of the VA Loan Program, experience in assisting veterans counts. Many veterans don’t know about the VA loan program or have concerns that they may not qualify. Look for a lender that has loan officers dedicated solely to veterans, or a loan officer with experience. You may even find a loan officer who is a veteran themselves.
o Expertise – With experience comes expertise. The VA Loan Program has a number of very specific requirements. You’ll want a lender:
- Who understands the requirements for Certificate of Eligibility, or COE. Your lender should be able to explain what discharge paperwork is needed and the specific requirements a borrower must meet to qualify.
- Who is well versed in the different types of VA loans for both purchase and refinance. These include the VA purchase loan, the cash-out refinance, and the Interest Rate Reduction Refinance or IRRRL, which is a streamlined refinance program that enables veterans to obtain a lower interest rate and/or shorter term with no appraisal and no income or asset documentation required.
- Who understands the VA loan funding fee. This is a one time fee that varies depending on the amount of your down payment (remember, no down payment is required) and the type of veteran you are. For example, a first time borrower in the armed forces putting no money down would pay a fee of 2.15% of the total loan amount. If the same individual were to put 10% down or more the fee would be reduced to to 1.25% of the loan amount. National Guard and reservists pay about a quarter of a percentage point more than those in active duty. For veterans using the program a second time who do not make a down payment, the fee would be 3.3 % of the total amount they’re borrowing. The VA loan funding fee is waived for any vets currently receiving disability compensation.
- Who can assist you in meeting the minimum credit score. While the VA loan has no credit score requirement, most lenders will require a minimum credit score between 580 and 620. If you have outstanding debt, other liens, or missed payments which have lowered your credit score, a good lender can instruct you on how to improve your credit score in six months to a year.
- Who has a clear understanding of the VA Minimum Property Requirements or MPRs. The VA loan requires that a home meet certain criteria as part of the appraisal process in addition to determining the value of the property. The right lender can help educate you and your Realtor in the event he or she is not familiar with these requirements.
- Who provides outstanding customer service. This means keeping you up-to-date throughout the loan approval process, making themselves available to answer your questions, assist you in identifying the necessary documentation and resolving any issues that may arise.
The VA loan was created as one way for the federal government and people of the U.S. to thank those who so selflessly served our country. As a veteran you have the right to access the full benefits of the VA Loan Program. To do this right, don’t choose just any lender. Contact Embrace Home Loans to learn more about VA loans and find out if you may qualify.